The Santa Teresa Health Center provides help and treatment for alcoholism and drug addiction. The case offers a real-world setting to discuss the challenges facing hybrid organizations as they seek to balance the passion, values, and mission of a social, not-for-profit organization with the efficiency, innovation, and resources of a traditional for-profit organization. Furthermore, the case provides food for thought about ways to improve the cost allocation to patients and this way provides relevant information for decision-making and improvements to the management of the clinic.

In a not-for-profit organization, the goal is to maximize social impact, not financial results. Still, the firm needs to employ management knowledge to pursue the sustainability of its work.

(1) address a refined cost allocation of indirect costs (using ABC and the cost allocation bases you find appropriate given the information provided);

(2) assess the profitability of the 3 services (i.e., alcoholism, drug, aftercare) in light of the new allocation of indirect costs;

(3) discuss options to find short-term gains for the Santa Teresa Health Center perhaps suggesting a different mix of services in light of the limited space available, and

(4) suggest longer-term improvement possibilities or broader strategic alternatives.